Choices

Investors have many different investment choices, and the option to invest in gold is just one of them. Gold is an investment option that is near and dear to our hearts, as we launched the United States’ first gold fund back in 1968. As part of our series on investing for beginners, let’s take a look at the following about gold and investing in gold.

Advantages

Gold offers a number of advantages compared to other asset classes (stocks, bonds, etc.):

Since the very beginning of history, gold has been used as money or as security for money.
Gold has a diversification effect with respect to shares, bonds, and real estate. In the past, when there were large drops in the equity markets, the gold prices have dropped much less or even increased.
Gold has attractive fundamental characteristics: Demand for gold has been increasing for years, while the annual supply remains stable.
Of course, as with all investments, there is always a risk factor and there is no guarantee that gold will keep this role in the future.

How to invest

There are several ways to obtain exposure to the gold price. We will explore:

Gold bullion or gold coins
Gold jewelry
Gold certificates
Shares in gold miners (or a more diversified option like a gold miners ETF)
Let’s take a look at each of these options.

1. Historically, the share prices of gold miners have increased disproportionately when gold prices increase. The reason is that their profitability increases disproportionately if revenue increases while costs remain the same. Conversely, the opposite is also true: When gold prices drop, the share prices may drop disproportionately.
2. Risk factors – Investing in gold miners is subject to a number of specific risks. The most important one is sensitivity to the price of gold. Additionally, there is the risk of investing in the natural resources sector: companies can be negatively affected by numerous factors, such as political and economic circumstances, exchange rate fluctuations, import restrictions, and exhaustion of natural resources.
3. Invest in gold miners via Golden Group – If you want to broadly invest in gold mining shares, you can turn to gold mining GGS. This instrument eliminates the need to search for promising individual shares and allows investors to buy across the entire sector on a broadly diversified basis.